The revenue raised from landlord licensing schemes across the country could improve housing standards in the private rental sector, if reinvested into enforcing legislation, according to PayProp.
The lettings payment provider says that, if councils use this money to police an increasingly diverse private rental sector, this could benefit tenants, landlords and letting agents in the long-term.
It is estimated that around 16% of English local authorities have a selective licensing scheme in place, covering almost half a million rental homes.
On top of this, since October 2018, it has been mandatory for all landlords of Houses in Multiple Occupation (HMOs) to obtain a licence for their properties.
However, there are currently no obligations for local authorities to invest licensing revenue back into housing.
Recent research found that the average landlord license across the UK costs £591. This means that a typical council with a scheme in place raises £144,629 per year, with Liverpool City Council earning a high of around £4m from its scheme, which covers 42,000 properties.
Furthermore, despite rules that mean landlords can be handed civil penalties of up to £30,000 for non-compliance with a licensing scheme, the average fine for a licensing offence in 2017 was £926.
“Effective enforcement of rental sector standards is one of the biggest problems facing the lettings industry,” believes Neil Cobbold, the Chief Operating Officer of PayProp. “Landlords might be happier to pay for these licences if they know the money is going to be used to raise private rental sector standards and identify rogue operators.”
He continues: “Licensing schemes are sometimes criticised for being revenue raisers for local councils. However, if authorities are more open about where the money is going and more focused on reinvesting it into housing, licensing schemes could be more effective, with higher rates of compliance.”
The costs, terms and exceptions of licensing schemes vary depending on which local authority is operating the scheme.
For example, the cost of some licences is based on the property type, while others are based on the number of occupants or amount of rooms in a home.
“A standard approach to licensing could make projects easier to enforce, while making things less confusing and creating a level playing field for landlords,” Cobbold believes.
Last summer, the Ministry for Housing, Communities and Local Government announced a review of the selective licensing scheme, the results of which are expected for public release shortly.
“We await the results of the Government’s review of selective licensing with interest,” says Cobbold. “Effective enforcement and details on what licensing revenue is used for are two of the key topics that could be addressed.”
He concludes: “13 years after selective licensing schemes were first introduced, it’s encouraging that the system is still being reviewed to determine whether it is fit for purpose in its current form.”